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Film Tax Credits in Canada

written by: Shane Burley•edited by: Rhonda Callow•updated: 7/7/2011

Here is an overview of the film tax credit program in Canada.

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    What is a Tax Credit?

    The film industry is a largely private and commercial enterprise where films are produced as a commodity to be sold. Like any industry, taxes are taken on film production but it is in this context that different states and countries may try to initiate more production in their area. This is one of the ways a state body can try to shift an industry, such as with green tax initiatives. Film tax credits are a removal of part of the taxes that would ordinarily have to be paid on the various aspects of the production. This tax credit is used to inspire more productions to take place in a specific area, such as growing the industry in specific countries and may help with achieving film funding. Film tax credits are done because of the immense stimulus that productions bring to a local economy, and since the film tax credits will actually lower the overall production costs it may make it worth it to move the production to go to that area. The film tax credits in Canada are famous in the United States because they have inspired areas in Vancouver and Toronto to be instrumental for the film industry. Here is a general look at how the film tax credits in Canada work.

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    The Canadian Tax Credit Program

    The film tax credit program in Canada is called the Film or Video Production Services Tax Credit. If a production is looking to receive this film tax credit in Canada they have to first receive an Accredited Film or Video Production Certificate, which is awarded only if the production actually achieves the restrictions set apart in section 125.5 of the Income Tax Act.

    The film tax credit system for Canada is done specifically to promote the employment of Canadians. The corporation seeking the film tax credit in Canada can be either Canadian or foreign owned, which is why many American film companies utilize it during film productions. The film tax credit is offered then on a yearly basis on labor expenditures only, and it can also only be claimed as long as the production has been approved and a certificate has been awarded.

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    Federal and Provincial Tax Credit Programs

    The base film tax credit program for Canada is the federal program that was established in 1997. This program says that 16% of the cost of the labor for approved Canadian employees on approved productions is refundable.

    The federal program is the broader film tax credit program, but there were also province specific Canadian film tax credit programs created in 1997. These film tax credit programs have a much larger range because they extend to spend based incentive programs as well as the labor based ones. They also have the ability to range anywhere from 37% to 70% of the eligible labor on top of whatever is added for the spend based incentive, which will be much less. To determine which film tax credit would be best for your production you have to first look at the specifics of your production, then at what is required to achieve qualification on both the federal and provincial level.

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    There are a few resources that people inquiring into the film tax credit program in Canada can turn to. Canada Film Capital is a great place to go to get the basic information about the Canadian film tax credit system and get the type of financing services that you are going to need. The National Film Board of Canada is the central location for all filmmakers wanting to work in Canada should look for, especially if you are looking for national funding along with your film tax credits.